Use of alternative dispute resolution in construction: A comparative study

Abstract

Arbitration and litigation are conventional methods to resolve construction disputes. Nevertheless, these processes have been criticized for being costly, lengthy and adversarial (Jahren & Dammeier 1990; Lim 1993; Cheung 1999). The use of Alternative Dispute Resolution (ADR) has been advocated to address the above criticism (Hibberd & Newman 1999). During the last two decades, the quest for greater use of ADR in construction has prompted its statutory use in some jurisdictions (Gaitskell 2007; Kennedy 2008). The first piece of legislation in this regard is the Housing Grants, Construction and Regeneration Act (HGCRA) that was passed in 1996 in the United Kingdom (UK). The statutory use of adjudication for construction disputes was brought into force in 1998 through a piece of secondary legislation (Scheme for Construction Contracts) which sets out the minimum standards of payment terms (to protect the sub-contractors’ cash flow) and the procedure to be followed in an adjudication. Since then, the use of adjudication has become available as a statutory right open to all parties in all construction contracts. Nevertheless, if the parties are not happy with the adjudicator’s decision, they can refer the dispute to arbitration in accordance with their contract-usually upon practical completion of the project (Anderson 2008; Kennedy 2008). Following this UK initiative, similar statutory use of ADR had been promulgated in Australia, New Zealand and Singapore (Gaitskell 2007). Moreover, ADR movement in HongKong has been confined at the contractual level (Chau 2007). Voluntary mediation has been introduced in the standard forms of construction contract for public projects since early 1990s (Cheung 1999). In 2005, the private sector followed the Government’s footsteps and voluntary mediation was for the first time included in the Joint Contract Working Committee’s Standard Form of Building Contract (Leung 2007). More significantly, the Hong Kong Government has recently made a policy decision to promote a greater use of mediation to enhance speedy and cost effective construction dispute resolution (Wong 2008). The fact that different approaches are used to tackle the same problem makes it interesting to study the underlying reasons. For this purpose, this paper presents a comparison of the approaches taken in five major jurisdictions in handling construction disputes. These five jurisdictions are: Australia, Hong Kong, New Zealand, Singapore and the UK. The comparison also provides valuable information on the difference in emphasis towards construction dispute resolution.